Low Doc Home Loans interest rates.
Interest rates for low doc home loans can and do vary widely.
Currently there are three year fixed rates starting from 5.57% (CR 6.11%). This low doc home loan is available through non bank channels. It is generally in line with normal home loan rates. Remember, you cannot walk into one of the big four banks and get this loan.
For Low Doc home loans, normally, if the LVR is 60% or less then the interest rate for low doc home loans is similar to or the same as normal home loan rates. When the LVR starts to increase or there is some form of credit impairment that the spread between low doc home loans and normal home loans will start to widen.
Having said that, be careful in regards to which low doc home loan lender you go with. Lenders generally have the right to vary interest rates even after the low doc home loan has started.
There may be a perception that by going though one of the big four banks you will get a good low doc home loan rate.
however, the Commonwealth Bank (CBA) has recently advised its broker network to contact their low doc home loan customers to advise them that the bank will be raising the interest rates for some existing low doc home loans customers by 0.25%
CBA has said that it would be writing to all its existing low doc home customers with loans that were funded before 1 April 2012 to advise them interest rates will be lifted unilaterally. This means even though other rates are falling the rates for low doc home loans customers will increase mid December 2012
How significant is this move for low doc borrowers?
Well, to put things in perspective it is believed that CBA currently has over $5 billion, yes $5 billion worth of low doc home loans on its books.
It is now common knowledge that the low doc loans of old have gone. Previously if you had an ABN, had a 20% deposit, and completed a self-certified income declaration then it was fairly simple to get a low doc loan.
As the low doc market matured many of the major banks were lending at interest rates the same as or similar to normal full document home loans. This scenario could not last as it did not take into account the risk profile of low doc loans.
With the advent of the GFC and responsible lending low doc loans changed. This was a change for the better. What it did mean was income was now verified to a higher degree than previously.
This didn’t mean a return to full tax returns. It did mean alternative ways were looked at in substantiating income.
These generally include one of the following:-
- a letter from your accountant For many small businesses that use an accountant, who better knows their business circumstances than their regular accountant.
- 12 months BAS statements These statements give a good indication as to how the business is actually travelling. Given they are done every three months they are also timely.
- 6 months business bank trading statements showing the income coming into the business. These statement show the inflows and out flows of the entity generating the income.
The alternative ways of assessing income, including the insistence of two years abn and gst registration by most lenders now mean that income verified under low doc loans is more thorough.
Having the abn and gst registration for two years shows the business is ongoing.
There are commentators that predicted the demise of low doc loans for many years. At this stage they have been proved wrong.
Low doc loans are and always will be a part of the home loan market. Many low doc loans are still be written and this shows no sign of changing.
A lot of pundits forget that many of Australia’s small businesses are Australia’s wealth generators!
A Low Doc Loan with a maximum LVR of 70% and NO Lenders mortgage insurance and a cheap interest rate.
Low doc Loans requirements
- Minimum – 24 months trading
- Minimum – 24 months Business registration
- Minimum – 24 months registration for BAS
What documents do you need to provide for this low doc loan?
- A signed 12 months Profit and Loss account done via the Management Accounts of the Business (MYOB – does not need to be signed by an Accountant), and this can be done for any 12 month period (but no older than 6 months old)
- BAS for the same 12 month period, this is used to confirm sales in the Profit and Loss etc.
- Any other income sources (spouses PAYG, rental statements etc).
- The last date of the Profit and Loss can not be more than 6 months old. If this is the case will also require BAS to bring us up to date from the last date of the P&L.
How is serviceability calculated for this low doc loan?
- Total Net Profit shown in the profit and loss account, plus
- Add backs if any (interest on accounts being refinanced etc) shown in the Profit and Loss, plus
- Wages from the Group Certificate, plus
- Any other income
What do you get?
- Up to 70% LVR against any residential property with no maximum amount loan size
- Can be used for any purpose – purchases, refinances, debt consolidation and cash out (cash out max is $1.0m)
- Products include Variable, Fixed Rates or Professional Package
- NO Lenders Mortgage Insurance
- A low doc loan at a cheap interest rate
It is important to note The Profit and Loss does not have to coincide with a financial year. Just require a 12 month profit and loss for any 12 month period
Here is a low doc loans example:-
Business commences just over two years ago. For the first full financial year, business was in a start up phase and made a loss. This is normal For the last 12 months, business has gone strongly. Under this product there is not an averaging of figures, we are taking the latter profit figures produced. You can supply a signed Profit and Loss for the last 12 months (where you will be showing the majority profit) plus BAS for the same period + any other income.
All the above is a guide only. All low doc loans are subject to a lenders credit criteria.
Need more help call us on 1300 LOW DOC
Bankwest low doc loans have been temporarily withdrawn. These low doc loans were popular as they only required an accountants sign off which was within the low doc loan application form.
Low Doc Loans cash out. New Low doc Laon Product will allow up to $250,000 cash out.
Product Highlights include;
• Maximum LVR of 75%;
• Maximum loan size $1m;
• Security must be in a Category 1 location and must have a building on it. (No vacant land);
• 12 months ABN – Supported by Accountants Declaration
• No Defaults, Mortgage Arrears or Bankrupt History;
• ATO debts ok;
• Non performing unsecured debts ok;
• Unlimited debt consolidation;
• Access to generous cash out (amounts up to $250k with stated purpose only / over $250k the borrower will need to supply a Stat Dec outlining purpose of funds).
Want to know more call us:-
1300 LOW DOC 1300 569 362
Low Doc Loans rates are moving up as predicted. The interest rates for fixed low doc loans and variable low doc loans are heading up.
Since the beginning of 2012 we have seen the rate for low doc loans start to get more expensive. If you currently have a low doc loan and your rate is above 6% please call us on 1300 LOW DOC. Hurry this rate for low doc loan refinances will not last long.
Update March 2012
Both low doc loans refinance and low doc loans purchase are still available with no application fee and no monthly fee up to 60%
The rates for low doc loans have now continued to move up. The 5.99% interest rate has now gone. If you are still quick you still may be able to lock in a rate below 6.1%
Remember these low doc loans require no BAS and no accountants letter. However, 12 months business bank trading statements is needed to show strong income.
Call us on 1300 LOW DOC